Watch out, Nokia: Global mobile phone sales slowing

It seems as though hardly a month goes by without the launch of some flashy new mobile phone. Yet according to new figures from Gartner, overall mobile sales are slowing throughout most of the world, which could mean trouble ahead for some vendors – particularly Nokia.

Total sales of all types of handsets were essentially flat for the first quarter of 2013, the report states, growing just 0.7 per cent over the same period in 2012.

Worse, even that meager increase was attributable to just one region, the Asia/Pacific, which grew sales by 6.4 per cent. Sales in all other regions were down, particularly in areas where the smartphone market is mature.

Mobile phone sales in the EMEA (Europe, Middle East, and Africa) region were down 3.6 per cent compared to the first quarter of 2012, Latin American sales were down 3.8 per cent, and sales in Japan decreased by 7.3 per cent. And in North America, which embraced smartphones in a big way early on, overall handset sales were down a troubling 9.5 per cent.

Even market leaders like Apple and Samsung are feeling the pinch, according to Gartner principal research analyst Anshul Gupta, who compiled the report.

"Apple is faced with the challenge of being increasingly dependent on the replacement market as its addressable market is capped," he said.

Put simply, that means it has to convince customers to buy new phones when they already have ones that work – something that's proving particularly difficult among customers who had previously bought low-end feature phones who see little reason to upgrade.

"Feature phones users across the world are either finding their existing phones good enough or are waiting for smartphones prices to drop further," Gupta said. "Either way the prospect of longer replacement cycles is certainly not a good news for both vendors and carriers looking to move users forward."

Nokia probably has it worst of all. Unlike Apple and BlackBerry, for example, which are focusing exclusively on smartphones, feature phone shipments still make up a sizeable portion of Nokia's overall handset business. And yet Gartner's figures show that global feature phone sales shrunk a whopping 21.8 per cent, year-on-year, in the first quarter of 2013.

What's more, Nokia's smartphones running Windows Phone 8 have proven unpopular with consumers compared to Android handsets from the likes of HTC, LG, Samsung, and others – a fact that has the Finnish firm's shareholders, and its balance sheet, seeing red.

According to Gartner's figures, Nokia's global sales in the first quarter were down 24 per cent from the previous year's quarter, and its market share shrank from 19.7 per cent to 14.8 per cent. Meanwhile, Apple, Huawei, LG, Lenovo, Samsung, and Sony all saw their sales increase, if only modestly.

As operating systems go, Android devices commanded a 74.4 per cent share of the smartphone market during the first quarter, up from a 56.9 per cent share in the same quarter the previous year.

Apple's iOS came in second with an 18.2 per cent share, down from 22.5 per cent in Q1 of 2012, while all of the other smartphone platforms measured – including Bada, BlackBerry, Symbian, and Windows Phone – came in at single digits or less.

"There are two clear leaders in the OS market and Android's dominance in the OS market is unshakable," Gupta said.

Another thing that should worry Nokia, Samsung, Apple, and other top mobile makers is how rapidly local manufacturers are making inroads in regions where phone sales are still strong – most notably, in China.

Gartner estimates that 53.1 per cent of global mobile phones are now owned by customers in the Asia/Pacific region, and nearly half of those are in China. Furthermore, Chinese manufacturers held a 29 per cent share of global smartphone sales in the first quarter of 2013, up from 13.2 per cent in the year-ago quarter.

"The Chinese and local manufacturers have been exemplary at addressing the demands of buyers by offering affordable devices with optimum features such as 2.5G (EDGE) instead of 3G in a smartphone," Gupta explained.

But all wasn't doom and gloom for the leading global handset makers. Apple sold nearly 7 million iPhones in China in the first quarter, and the fact that Chinese manufacturers have been enjoying success in their home market proves, at least, that demand remains strong there.

The trick will be for Apple and others to tap into that nascent demand by releasing products that cater to the unique needs of customers in developing markets. Persistent rumor has it that Cupertino may soon be ready to do just that; but if Gartner's figures indicate trends, it had better hurry.

As for Nokia, however, the writing may already be on the wall, and the story it tells is a grim one. ®